Experts issued a warning to individuals who are late in filing their UK tax returns to make the necessary corrections as soon as possible to avoid the higher penalties that came into force this month.
The deadline for filing the tax return for the 2022-2023 self-assessment was 31 January. This year, 10% more people missed the deadline than last year. Due to the multi-year freeze on tax thresholds, more people were forced to complete a self-assessment return, resulting in a record number of returns.
In addition, HM Revenue & Customs will immediately penalise late tax returns with £100; after three months this will increase to £10 per day, up to a maximum of £900. The BDO Dawn Register warns that from 1 May, the penalties for late filing will increase and may catch many people off guard.
“On May 1, the penalty regime for late filing steps up a gear and can really take people by surprise,” said Dawn Register, head of tax dispute resolution at accountancy firm BDO.
Also, a number of other people are being penalised without knowing they have to do so; for example, people with overseas bank accounts who fail to inform HMRC of their interest income may be penalised even though there is no further tax to pay.
It is possible that those dealing with the rental property market in the 2022-2023 tax year may neglect to complete a self-assessment tax return, which could result in inadvertent non-compliance.
This may result in them failing to report relevant transactions on their tax return, even if they have paid capital gains tax and notified HMRC within 60 days of the sale, regardless of additional tax liabilities.
HMRC's Strict Late Tax Payment Penalties
Fines are imposed for late payment of tax, in addition to penalties for late filing. These fines also include annual interest of 7.75% on the tax due, calculated pro rata until payment is received, as well as additional fines of 5% of the tax due after 30 days, six months and one year. HMRC's late payment interest rate is the highest it has been for 16 years.
Michelle Denny-West, a partner at Moore Kingston Smith, another accountancy firm, said late payment and payment penalties were "a pretty aggressive part of the tax system". She urged anyone who had not yet submitted their tax return late to do so as soon as possible.
Dawn Register, an expert on procrastination, warns that waiting to file a tax return can result in severe penalties. She stresses the importance of completing tax returns as soon as possible, even if it means estimating the amounts, in order to avoid penalties and ensure tax compliance, both of which will ultimately help people.